Wow, this post got a lot of attention/criticism on the web (see comments on RGE Economonitor, Investment Postcards from Cape Town, and of course News N Economics). I guess it's hard to believe that the mortgage buildup over the last decade was financing health care rather than durable-goods consumption.
The chart illustrates annual real spending, as released by the BEA (see data here). The mortgage data comes from the Fed's Flow of Funds accounts. The BEA is smack in the middle of updating its history, following the comprehensive revisions, and some of the data is truncated at 1995.
I agree, but only to the point that the line dividing types of debt-fueled consumption growth is not clear - consumption was just growing. But I find this chart to be rather remarkable: notice how the trend term for durable-goods consumption growth peaks in the late 1990's, well before the run up in mortgage debt was established. Services got a bit of a push during the same period, but nothing like durables. And notice the positive correlation between some of the quicker rates of mortgage debt growth and the pace of health care spending.
Obviously this is not a quantitative study, rather a qualitative approach. But it does support the premise that the debt was going, at least in part, to finance health care spending. Frankly, I don't know why it is so hard to believe. Anecdotally, I have a friend that is just swimming in debt, all on an uninsured week at the hospital.